Abstract
In his recent book, Andrea Colli has taken up the challenge of participating in the discussion around the emergence of multinational firms and the globalization of international business. Economists and business historians tend to consider both of these as contemporary phenomena, something that resulted from the collapse of the Iron Curtain in 1989. Colli states, however, that historians can contribute to this discussion on two levels. First, historical research has shown that globalization was not a linear process, but a series of episodes that can be linked. Second, it has illustrated that multinational corporations are not a contemporary phenomenon but have their roots deep in history. The book offers an overview of the long-term evolvement of international business. It is based upon three main themes: technological development, emergence of national and international level institutions, and cultural and political attitudes towards the globalization process in different times and geographical areas.
The book is divided into six main chronological chapters. The first two chapters deal with the development of international business before the First Industrial Revolution. Chapter 1 outlines the general framework of the international economy from the 15th century onwards. It explains how the Magellan and Pacific trade systems were connected to the old Eurasian trading and how this resulted in a vigorous growth in the volume of international trade. The next chapter then analyses the institutional responses caused by this economic growth. A new organizational model was introduced as chartered companies, such as the Dutch East India Company and the British East India Company, were established. These companies differed from pre-existing forms of business organizations in two ways. First of all, they had been granted a monopoly position in terms of certain merchandise or areas. Second, they separated ownership, management and deployment of resources from each other. The era of chartered companies lasted until the mid-19th century.
Chapter 3 analyses the impact of new technologies on international trade between 1800 and 1870. Colli argues (p. 65) that the First Industrial Revolution transformed the very nature of capitalism by eliminating intermediaries in international trading. Furthermore, he maintains (p. 66) that prevailing cosmopolitan culture, development of institutional frameworks and new structures and strategies of foreign activity had a major impact on the dynamics of international business. As a result, a novel business organization model was introduced, as highly complicated multinational trading companies and free-standing companies, based on foreign investments, emerged to dominate international business.
Chapter 4 is about the first period of globalization and the birth of modern multinationals from 1870 to 1914. Scientific research became an essential part of production in the Second Industrial Revolution. As a result, several chemically transformed materials, standardized products and complex machines built from interchangeable components were introduced to the market. At the same time, companies started to grow. Colli argues (p. 131) that as part of their vertical integration process, companies started to invest abroad in order to secure access to the resources they needed and to maintain their position in domestic markets. This chapter also discusses the entry strategies of companies with different geographical origins.
Chapter 5 analyses international business during the crises that happened between 1914 and 1945. The Great War, Great Depression in the next decade and Second World War destroyed the fragile equilibrium created during the first period of globalization. The rise of nationalism and protectionism led eventually to economic fragmentation and progressive contraction of the international economy. Thus, international companies faced new problems and challenges as the political environment favoured indigenous business ventures or even became hostile to foreign companies. However, adaptation through international cartels, cloaking and camouflage techniques made it possible for international business activity to persist or even expand in these difficult circumstances.
Chapter 6 discusses international entrepreneurship in a new global economy from 1945 until 1990. The period started under American dominance because its two main competitors, Europe and Japan, had been more or less destroyed during the Second World War. American economic and industrial supremacy was founded mainly on endogenous factors. Colli argues that US dominance in international business was based on world leadership, especially in technology and capital-intensive industries (p. 179). American companies were able to develop their technological competence in a large domestic market and, having secured a leadership position, expand their business activities abroad where they did not have noteworthy competitors. Colli also maintains (p. 180) that the triumph of American companies on the international market resulted from their superior competence and scientific methods in marketing, distribution, administration, accounting and finance strategies. Europe and Japan began to progressively challenge this US dominance in the 1960s, and in the next decade, new rivals like South Korea and Brazil were also increasingly expanding their business activities to catch up with their competitors.
This book offers a profound overall picture of the long-term development of international business. Andrea Colli has succeeded in combining historical perspectives with modern economic theories and explanatory models and to explain how the different organization and business strategies of multinational enterprises have changed, and how these changes have influenced international business from medieval Europe to the present day. This narrative has skilfully been transferred between micro- and macro-level explanations through case studies analysing individual companies, for example, the British East India Company, Pirelli, Singer, Saint-Gobain and the NEC Corporation in Japan. In the acknowledgements, Colli states that the book has been written for business history graduate students. As such, it certainly meets the expectations, but it can also be recommended to all historians interested in long-term trends in international business.